India: ASEAN services and investment deal
Published 23 September 2014
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0.1 This publication was archived on 5 August 2016.
This article is not current. Please refer to Overseas Business Risk - India.
0.2 Summary
India and nine of the ten members of ASEAN sign a new agreement to liberalise trade in services and bilateral investment, building on their existing free trade agreement (FTA) for goods and covering a combined population of 1.8 billion. The Philippines is expected to ink the deal soon. Implications for the new Indian government’s trade policy, “ASEAN centrality”, the Regional Comprehensive Economic Partnership (RCEP) and UK companies.
0.3 Detail
India and all of ASEAN’s members bar the Philippines recently signed an agreement to liberalise trade in services and bilateral investment. The new pact was originally due to be signed at the India-ASEAN Economic Ministers Meeting in Burma in August, but Indian Commerce and Industry Minister Nirmala Sitharaman pulled out at the last minute, citing a pressing domestic commitment. The deal has instead been signed by circulating the text around the countries involved. The Philippines has not yet signed, citing the need to complete domestic procedures first, but are expected to sign the agreement soon.
The agreement covers a total population of around 1.8 billion people and will build on their existing FTA for goods, which has been in place since 2010. Negotiations on the deal were concluded at the end of 2012, under the previous Indian administration. Once ratified by ASEAN parliaments (India does not need parliamentary approval), the new deal will then be merged with the existing FTA in goods to form a Comprehensive Economic Partnership Agreement. A decision on when to bring the new deal into force will reportedly not be taken until leaders from the 11 countries meet in Burma in November at the India-ASEAN Summit.
The new FTA will relax restrictions on the (temporary) movement of professionals in a range of service industries, from accounting to nursing. But the level of market access liberalisation is limited – India is not offering much more to ASEAN than its existing WTO commitments. As with ASEAN’s other agreements with external trading partners, the investment and services deal includes separate commitments to India by each of the 10 members of the SE Asian bloc. For its part, India has agreed separate schedules of commitments with Indonesia and the Philippines and one for the other eight countries.
0.4 Comment
Once implemented, the new deal will help reinforce ASEAN’s centrality in the regional trade architecture. The regional bloc also recently agreed to enhance its existing FTAs with China, a much larger trading partner than India, Australia and New Zealand. All these developments could have implications for progress on the Regional Comprehensive Economic Partnership (RCEP), the “mega-trade pact” which includes the ten members of ASEAN and its FTA partners India, China, Japan, S Korea, Australia and New Zealand.
The limited market access commitments mean UK services companies and investors are unlikely to be put at a significant competitive disadvantage in India vis-a-vis, for example, those from Singapore and Malaysia. British companies with operations in both markets might even find the relaxation of restrictions on the movement of temporary workers helpful.
0.5 Disclaimer
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